Why should we care about deficits?

The Gray Area with Sean Illing

Stony Brook University’s Stephanie Kelton is the most influential proponent of Modern Monetary Theory, a heterodox take on government budgets that urges a focus on inflation, rather than deficits. Jason Furman was President Barack Obama’s chief economist, and while he’s firmly in the economic mainstream, he’s been pushing his colleagues to recognize that the economy has changed in ways that make our debt levels less worrying.

I asked the two of them to join the podcast together because I wanted to understand some questions at the intersection of their competing theories. Should we worry about government deficits, and if so, when? Does MMT actually offer a free lunch, or is it just a different way of calculating the bill? When can the Federal Reserve print money without triggering inflation? How would an administration that followed MMT actually diverge from what we've seen in the past? Why did so many mainstream economists make such bad predictions about deficits after the financial crisis? And does Medicare-for-all actually need to be paid for?

This is a weedsy conversation about one of the most important questions in American governance. Enjoy!

Book Recommendations:

Thick: And Other Essays by Tressie McMillan Cottom

Understanding Modern Money: The Key to Full Employment and Price Stabilityby L. Randall Wray

Saving Capitalism from the Capitalists by Raghuram G. Rajan

The Worldly Philosophers by Robert L. Heilbroner

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